Companies caught between the road and a high price
By DON SHILLING
VINDICATOR BUSINESS EDITOR
YOUNGSTOWN -- Fuel price increases are hitting area companies right where it hurts --the bottom line.
Companies with vehicles on the road are making some tough choices because they can't pass along all of their added fuel costs to customers.
A local ambulance company is cutting back on travel and office expenses. A limousine company says it may have to increase charges for longer trips, while a bakery says it will be looking to buy more fuel efficient trucks and equipment.
Trucking companies are hit particularly hard by fuel price increases so they usually add surcharges to their bills. One area company says, however, that some of its largest customers simply can't afford to pay.
"The trucking business is in dire straits now," said Nick Strimbu, vice president at Strimbu Trucking in Brookfield. "We've seen highs and we've seen lows, but the last 12 months have been very hurtful to us."
On top of escalating insurance costs and a bad economy, fuel prices have spiked for the second straight year.
Last year, the diesel fuel bill for the company's 150 trucks was about $450,000 higher than the year before. The company now is paying about $44,000 a week for fuel.
Strimbu said a fuel surcharge has covered about half the increased cost.
"We've just had to eat the rest," he said.
Steel customers: If the cost continues to rise, Strimbu officials will go back to customers and ask for help. That may not work, however, because most of Strimbu's work is hauling for steel mills, which are hurting financially. Strimbu's business is off about 15 percent in the last six months, he said.
Two of its largest customers, LTV Corp. and Wheeling-Pittsburgh Steel Corp., have filed for bankruptcy protection.
"They just say, 'We're all in this together,'" he said.
The best hope for the future is that some of its weaker competitors will be forced out of business by the economy and new insurance rules, he said. Fewer competitors could allow for rate increases, he said.
The limousine business also is too competitive for fuel price increases to be passed on to customers, said Frank Bagnoli, owner of FAB Limousines in Austintown.
"It's affecting us dramatically," he said.
He said the company is absorbing the price increases, but it may have to increase its charges for out-of-town trips if fuel prices stay high.
The spike in fuel prices comes at a difficult time because the company is coping with a 30 percent increase in insurance rates and 30 percent increase in utilities, he said.
Contracts: At Clemente Ambulance Service in Struthers, increased fuel costs can't be passed along because of set Medicare payments and contracts with insurance companies.
"We pretty much have to eat it," said Lori Fuzo, a financial consultant to the company.
The company is compensating by cutting overhead, she said. Fewer people are going to seminars, and office equipment purchases are being delayed.
The company's fuel bills are between $6,000 and $8,000 a month, which is double what they were a couple years ago when prices at the pump were low.
Fuzo said the company has increased its mileage rates on Medicare bills, but that is done only to document the need for a higher reimbursement rate next year.
Company officials are concerned, however, because lower Medicare reimbursement rates are set to take effect later this year under new federal regulations. Just over half of the company's business is Medicare related.
As for the rest of the business, contracts with insurance companies provide set reimbursement rates and are renewed annually.
Bakery: Joe Schwebel, president of Schwebel Baking Co. in Boardman, said it doesn't look like high energy prices are going away.
He said the company is working with its suppliers on ways to find savings and it is considering buying more efficient trucks and other equipment in its manufacturing operations.
He said he also is concerned about the effect that increased fuel and utility costs are having on consumer's discretionary spending, including food.
Tom Carney of Carney-McNicholas, an Austintown-based moving company, said higher fuel prices have hurt profits there.
United Van Lines has provided for an extra fuel charge, but it doesn't cover all of the added costs, he said. The moving industry also is too competitive to allow for enough of a charge to make up for the costs, he said.
A slowing economy also is hurting the industry, he said. Revenues at his company are ahead of last year at this time but he is expecting a slowdown later this year.